D-Day Day.

On this date in 1944 the combined armed forces of the allied nations launched Operation Overlord, the invasion of Normandy. Commonly this has become known as D-Day, and spelled the “beginning of the end” of the Nazi Party (quoting Winston Churchill). As most know, it was successful.

We should all remember and honor and thank them for what they did on that day. Especially to those that did not come back.

To learn more, read D-Day by Stephen Ambrose. Or see the movies The Longest Day staring John Wayne, Ike, or Saving Private Ryan, staring Tom Hanks. (To be clear, Saving Private Ryan was fictional, but it was based on real events. The portrait of what they did and what they experienced was real.)

YESTERDAY, 05 June 2007

There was an event that impacted rates yesterday just prior to the ISM-Services Index. FED Chair Ben Bernanke gave a speech in Cape Town, South Africa. During that speed he indicated that the economy would continue to grow at a moderate pace through the remainder of 2007, and that inflation was still a concern. He also mentioned that Housing Slump was not having as great an influence on the overall economy.

While Bernanke’s comment, “On average, over [the] coming quarters, we expect the economy to advance at a moderate pace, close to or slightly below the economy’s trend rate of expansion…”
This sounds bad for the economy and therefore good for rates, it was not. His assessment of the economy is for growth. It was a disappointment for bond traders and bond investors, who were looking for some sign of actual slowing, not moderate growth. Once again, their hopes of a rate cut of the Fed Funds rate anytime soon were dashed.

The fact that he also mentioned that core-inflation was still a concern only added insult to injury. The Fed-chair poured salt into the wound when he said that the housing sector – the major wound on the economy – was not impacting the rest of the economy.

TODAY, 06 June, 2007.

The bond market is trading around yesterday’s close with most of today’s data either being on cue for predictions, or being unimportant. The 10-year Treasury  is at -.008% with the rate at 4.968%. At one point it was 4.995% which was +.019%, but that spike was very temporary.

The biggest news of the day was the revised-Productivity report which was +1.0%, within the expected +1.0% to +1.4%. It was lower than the +1.7% last reported. Attached to this item was the Unit Labor Cost, which was higher than the forecast range of +1.5%, at +1.8%. This reading MAY have been what caused the momentary spike. By-and-large, this was clearly ignored.

The weekly MBA Purchase Application did not get attention from the bond market, but it is still important to our readers. It was fairly flat at 433.6 in week-to-week analysis; the 4-week moving average was 432.75. Last week’s numbers were 427.0 and 433.9 respectively.

The Challenger Job Cut Survey was only slightly higher than last month’s 70,672 % with a very small increase at 71,115. That may not be good for next month’s Unemployment Rate, but may be good for rates next month when the Employment Situation Report is out. [We need to caution, that the Challenger Survey’s record at predicting unemployment is moderate at best.]

SHORT-TERM OUTLOOK [06 June 2007]

On 05 June, there was some potential good news for next week’s retail sales report on 13 June. Both UBS Store Sales and Redbook Survey have been trending downward in the last few weeks. This morning’s UBS Store Sales were -0.5% in week-to-week measurement, and +2.3% in year-to-year analysis. Redbook was up only 1.8%.

Neither number had any estimates, and both are largely ignored by the bond market. Still the can give an indication to next weeks sales numbers. When the estimates come out, they should be lower.

Steve Boxmeyer [612] 799 – 6858
Steve@LendWithIntegrity.com